The Treasury has released Notices 2018-99 and 2018-100 related to section 512(a)(7) of the Internal Revenue Code which imposes a 21% tax on certain employee benefits of churches and nonprofits, including the parking tax.

Notice 2018-99 provides interim guidance of how organizations should calculate the amount of UBIT (Unrelated Business Income Tax) tax-exempt organizations should pay under the nonprofit parking tax. The notice allows organizations to use any reasonable method in calculating the expenses subject to UBIT, however, it notes that that using the value of employee parking is not a reasonable method. The notice outlines how organizations can allocate expenses related to employee reserved parking, non-reserved employee parking, reserved non-employee parking, and other general parking. The notice states parking expenses include, but are not limited to, “repairs, maintenance, utility cost, insurance, property taxes, interest, snow and ice removal, leaf removal, trash removal, cleaning, landscape costs, parking lot attendant expenses, security, and rent or lease payments….” The notice then lays out a four step process and includes two examples, including a church, of how tax-exempt organizations might calculate their liability under this tax.

Notice 2018-100 provides relief to some tax-exempt organization for underpayment penalties of estimated income tax payments required to be made on or before December 17, 2018.

While these notices provide some guidance to tax-exempt organizations in how to calculate the nonprofit parking tax, they also confirm that this tax brings unnecessary complexity and cost to nonprofits serving charitable purposes. For this reason, ECFA continues to call upon Congress to repeal the nonprofit parking tax altogether.

ECFA will continue to report on updates to this issue in our News section.